ConAgra Foods estimated the fourth-quarter impairment charge to be $681 million, and it includes the company’s revised profit projections as well as expectations for continued challenges for some of the company’s retail brands, most notably Chef Boyardee.
The lower EPS was blamed on a 7 percent quarterly volume decline in the company’s Consumer Foods business as well as weak profits from its Private Brands unit. Quarterly operating profit for the Private Brands business is expected to show a comparable year-over-year decline of approximately $60 million, according to the company. The majority of the profit shortfall was driven by pricing concessions, cost challenges associated with integration of Ralcorp and business transition also weighed on profit performance.
“We are disappointed with the Consumer Foods volume performance, which negatively impacted comparable EPS,” said Gary Rodkin, CEO. “As we have communicated, we are in the process of improving product mix and promotion strategies in the Consumer Foods segment for better results and greater effectiveness, and we expect our volume performance to improve in fiscal 2015 as a result of this.
“Given the profit challenges in our Private Brands segment, we are also focused on margin improvement initiatives to offset the impact of pricing concessions. Even though our earnings are below expectations, we exceeded our fiscal 2014 operating cash flow and debt reduction targets.”
Looking ahead, Rodkin said he anticipates fiscal 2015 to be a “year of stabilization” for ConAgra Foods and he believes comparable EPS growth in fiscal 2016 and 2017 should accelerate to a high-single-digit growth rate.
But the company also noted that based on the challenges in the Private Brands segment in fiscal 2014 and the nature of the anticipated recovery from fiscal 2014 earnings levels, the company’s current profit projections for the Private Brands segment are below original plans for the next several years.